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St. Louis still adjusts to changes after Anheuser-Busch was bought out

The window of an employee break room reflects the downtown Anheuser-Busch brewery in St. Louis. What used to be the world headquarters of Anheuser-Busch is now the North American headquarters of Anheuser-Busch InBev, employing far fewer workers.

St. Louis Post-Dispatch (2008)

The window of an employee break room reflects the downtown Anheuser-Busch brewery in St. Louis. What used to be the world headquarters of Anheuser-Busch is now the North American headquarters of Anheuser-Busch InBev, employing far fewer workers.

ST. LOUIS — They wear jeans to work now. It no longer feels odd.

They walk by flower beds that might not be tended as obsessively as in years past.

Certainly fewer of them report to work each day on Pestalozzi Street, at the brewery and adjacent brick-and-glass rectangular office building.

This was once the global headquarters of Anheuser-Busch. Today it's the North American headquarters of Anheuser-Busch InBev.

They still make big decisions here, the kind of big-spending, imaginative deals that made this place so envied. But now, executives in New York City sometimes sign off on them, too.

This month marked the three-year anniversary since InBev took control of A-B in a $52 billion deal that rocked St. Louis, spreading justified fear of job losses and the anxiety that comes with losing control of a business widely considered a cultural institution.

Three years out, some things are clear. A-B is a diminished but still a huge, powerful presence. The worst of the cost-cutting appears over. The brewery and some executive functions have remained in St. Louis. But the corporate culture of the old A-B — tradition-bound, perfectionist, focused more on dominating the beer market than making money — has given way to an aggressive austerity.

The extensive cost-cutting has squeezed more profits out of A-B, but questions remain over whether the company's new bosses can grow brands and sell more beer.

And St. Louis is no longer the center of the company universe. A-B is now the U.S. subsidiary of A-B InBev. With that, old assumptions — and wistful illusions — about the relationship between the company and the city have changed, too.

"There's still people who bleed Budweiser when you slit their wrists," explained one former high-ranking A-B executive. "But some people don't feel that way anymore."

The changes were wrenching.

Early on, Carlos Brito, CEO of A-B InBev, announced plans to slash $1.5 billion at just A-B over three years. That was upped to $2.25 billion throughout the newly combined company. InBev also brought zero-based budgeting to A-B — costs are never assumed, but rather justified every year.

InBev's brass "are not known for their gentle demeanor," noted veteran industry watcher Tom Pirko of Bevmark Consulting.

The cost-cutters found a target-rich environment at A-B, which by all accounts had grown fat. Even before InBev arrived, A-B sensed its heady days were over. The U.S. beer market for big brands like Budweiser and Bud Light was stagnant. The company's stock price had stalled. So the brewer developed its own plan, code-named Blue Ocean, to slash $1 billion.

Dave Peacock, a longtime A-B executive who is now president of A-B, the subsidiary, recalled urging Brito to move fast. Integration would be painful, and he wanted to spare workers the anguish of uncertainty.

"I told him to just rip the Band-Aid off," Peacock said.

They did. And it hurt. Just as the U.S. economy fell into a steep recession, thousands of A-B workers nationwide lost their jobs. The company did not provide exact numbers. But in the city of St. Louis alone, the number of A-B workers fell 15 percent from 2007 to 2009, according to city government records. A-B had 4,396 workers in the city at the end of 2009, falling from the city's seventh-largest employer to its 10th-largest. But A-B was shedding workers long before InBev arrived, employing 1,158 fewer workers in the city — an 18 percent drop — in 2007 than seven years earlier.

Today, the subsidiary employs about 14,000 people nationwide, about 4,000 in the St. Louis region, including Southern Illinois, down from 6,000 in 2007, according to the company.

But the devastating cost-savings plan connected to integration ends this year. A-B InBev noted this month in an earnings report that it had saved $195 million in "integration synergies" in the first nine months of 2011, with $75 million more needed before year's end to reach its companywide three-year goal.

All along, InBev has been up front about its plans to slash costs and people at A-B, analysts said.

"They've done what they said they would do," Stifel Nicolaus financial analyst Mark Swartzberg said.

In another big change, A-B InBev judges its performance against firms such as Procter & Gamble and Unilever. The beer company sees its peers as companies selling soap and toothpaste. This year, A-B hired its new marketing chief from Wrigley, makers of chewing gum.

"As far as how we operate and who we look at, it is other consumer products companies," said Peacock, who spoke of the "phenomenal" changes that have taken place.

"It is a markedly different company," Swartzberg said. "From a culture standpoint, I like what I'm seeing."

St. Louis still adjusts to changes after Anheuser-Busch was bought out 11/26/11 [Last modified: Saturday, November 26, 2011 3:31am]
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